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The Federal Reserve – the US central bank – has opted not to increase its base interest rate but did not rule out further hikes as, it said, the full effect of rises has not been felt.

Ahead of the UK’s own knife-edge interest rate decision on Thursday, the Bank of England could potentially follow suit.

The cost of US borrowing had been brought to a 22-year high at the last interest rate meeting in July, after a brief pause in the Fed’s programme of rate rises.

The US central bank had increased rates in an effort to make borrowing money more expensive and bring down inflation by taking money out of the economy and dampening spending.

Inflation in the country stood at 3.7% in the year up to September, above the Fed’s 2% goal and a slight but continued increase from the two-year low of 3% recorded in June.

Despite the rate being significantly lower than the 6.7% of the UK, Fed chair Jerome Powell said there was a “long way to go” in the process of bringing inflation down to the 2% target.

“It’s more likely than not that it will be appropriate for us to raise rates one more time in the two remaining meetings this year,” Mr Powell said, referencing the beliefs of the majority of rate deciders.

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Former governor of the Bank of England, Lord Mervyn King, was asked by Sky News if Bank rate should be raised on Thursday.

In the UK, the Bank of England could keep the base interest rate at 5.25% after 14 consecutive rises, which began in December 2021.

Its latest decision is due at 12pm on Thursday.

A surprise drop in inflation has led analysts to believe the Bank may be in a position to ease its rate rises. A slight majority – 56% – believe the Bank will pause its cycle of raises.

US interest rates stand at 5.25% to 5.5%. Unlike the UK, the US interest rate is a range rather than a single percentage, because the Fed does not set a specific figure.

Instead, the figures are a target rate to guide lenders.

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Trump’s two-week timeline: What next for Iran?

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Trump's two-week timeline: What next for Iran?

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White House press secretary Karoline Leavitt has said Donald Trump will make a decision on whether to militarily strike Iran in the next two weeks. That’s as diplomatic talks between Western governments and the Iranians ramp up.

In today’s episode, US correspondents Mark Stone and Martha Kelner unpick why the delay might be, and the competing voices in the ears of the president.

If you’ve got a question you’d like the Trump100 team to answer, you can email it to trump100@sky.uk.

Don’t forget, you can also watch all episodes on our YouTube channel.

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Trump’s update on Iran timeline is significant – but it still keeps everyone guessing

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Donald Trump weighing up many risks before possible US strike on Iran

This is the most significant statement from the US president in days, though it still keeps everyone guessing.

In a message conveyed through his press secretary, he is giving diplomacy up to two weeks to work.

“Based on the fact that there’s a substantial chance of negotiations that may or may not take place with Iran in the near future, I will make my decision whether or not to go within the next two weeks,” Karoline Leavitt quoted him as saying.

It is not clear what “whether or not to go” entails.

Israel-Iran conflict: Latest updates

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Trump: Iran ‘weeks away’ from nuclear weapon

We know that he has been given a spectrum of different military options by his generals and we know that the Israelis are pressuring him to use American B2 bombers with their bunker-busting bombs to destroy Iran’s nuclear facility at Fodow.

The Israelis are encouraging no delay. But against that, he is weighing up many risks, both military and political.

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Militarily, it is not clear how successful a bunker-busting strike on Fordow would be.

Experts have suggested it would require several of the massive bombs, which have never been used in combat before, to be dropped on the site.

It is not as simple as one clean strike and job done.

Politically, the president is under significant pressure domestically not to get involved in Iran.

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MAGA civil war breaks out over Iran

Within his own MAGA coalition – influencers, politicians and media personalities are lining up in criticism of involvement in the conflict.

One of those leading the criticism, his former chief strategist Steve Bannon, who maintains huge influence, was seen entering the White House on Thursday.

His press secretary reiterated to us that the president always wants to give diplomacy a chance and she confirmed that his Middle East envoy Steve Witkoff has spoken to the Iranian foreign minister Abbas Araghchi.

Steve Bannon speaks at a conservative conference in Maryland earlier this month. Pic: AP
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Steve Bannon, seen recently at a conservative event in Maryland, is against US involvement in Iran. Pic: AP

European leaders, including the UK foreign secretary David Lammy, who is in Washington, are meeting Mr Araghchi in Geneva on Friday.

The two-week window – assuming it lasts that long – also gives space to better prepare for any strike and mitigate against some of the other risks of US involvement.

Read more from Sky News:
Is Trump losing his MAGA support?
Gantz defends conflict with Iran
‘Love Trump’ says Israeli minister

There are 40,000 troops in bases across the Middle East. It takes time to increase security at these bases or to move non-essential personnel out. It also takes time to move strategic military assets into the region.

The USS Nimitz aircraft carrier and its support vessels were redeployed from the Indo-Pacific on Monday. Their last known position was the Strait of Malacca two days ago.

The Nimitz Carrier Group will overlap with the USS Carl Vinson group which was deployed to the Middle East in March.

The potential two-week window also allows for more time for a ‘day after’ plan, given that the Israeli strategy appears to be regime change from within.

Since the Israeli action in Iran began last week, the worst-case scenario of mass casualties in Israel from Iranian attacks has not materialised.

The president is said to be surprised and encouraged by this. “Israel has exceeded a lot of people’s expectations in their abilities,” press secretary Karoline Leavitt said.

The Israeli success, the absence of a mass casualty event in Israel, and the lack of any sustained counterattack by Iranian proxies in the region remove reservations that previous presidents have had about taking on Iran.

That said, sources have told Sky News that the president is determined that the diplomatic solution should be given a chance despite current pessimism over the chances of success.

A critical two weeks ahead.

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SpaceX rocket being tested explodes into giant fireball before launch in Texas

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SpaceX rocket being tested explodes into giant fireball before launch in Texas

A SpaceX rocket has exploded before launch – sending a dramatic fireball high into the sky.

Starship 36 was preparing for its 10th test flight at Starbase – SpaceX’s launch site at the southern tip of Texas – when the incident occurred on Wednesday evening.

During take off procedures just after 11pm local time, the rocket exploded into a giant fireball.

The company described the incident as a “major anomaly”.

A screenshot of the moment a SpaceX rocket Starship 36 exploded in Starbase, Texas. Pic: NASASpaceFlight
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Starship 36 was preparing for its 10th test flight. Pic: NASASpaceFlight

A screenshot of the moment a SpaceX rocket Starship 36 exploded in Starbase, Texas. Pic: NASASpaceFlight
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The test flight failed at Starbase – SpaceX’s launch site. Pic: NASASpaceFlight

In a statement, it added: “A safety clear area around the site was maintained throughout the operation and all personnel are safe and accounted for.

“Our Starbase team is actively working to safe the test site and the immediate surrounding area in conjunction with local officials.

“There are no hazards to residents in surrounding communities, and we ask that individuals do not attempt to approach the area while safing operations continue.”

Read more from Sky News:
Trump: I ‘may or may not’ strike Iran
Elon Musk posts ‘drug test results’

It marks the latest failure for the space flight company, which hopes that Starship will one day be used to ferry people and cargo to Mars.

Last month, a Starship test flight began spinning out of control about 30 minutes after its launch because of fuel leaks – meaning it broke up on re-entry into the Earth’s atmosphere.

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May: SpaceX rocket spins out of control

That followed explosive past failures in January, where a rocket blew up about eight minutes after take-off, and March, which forced flights in Florida to be temporarily grounded.

SpaceX CEO Elon Musk said in May that despite the rocket failure, the test flight was a “big improvement”.

A day later, he said he wants to send a spacecraft crewed by humanoid robots on a voyage to Mars by the end of 2026.

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